Opening Bell: 10.23.18

U.S. Futures Tumble on Peak Profit, Trade Concerns: Markets Wrap [Bloomberg] The sell-off in U.S. equities put the S&P 500 Index on track for its 12th loss in 14 days as investors grow concerned that the trade war and rising interest rates have put an end to runaway expansion of corporate profits. Caterpillar sank 6 percent in early trading after flagging concern over rising materials costs, while 3M dropped 5 percent after cutting its forecast. The Stoxx Europe 600 Index slid toward the lowest level since December 2016 as Asian equities teetered on the verge of a bear market. Some of the steepest losses were in Japan, Hong Kong and China, where shares had posted the biggest jump in more than two years a day earlier. Disappointing earnings from Renault and some European tech companies added to the pain in Europe. Gold headed for its highest close in three months and benchmark Treasury yields dropped to 3.16 percent.

Turkey demands to know who ordered 'savage' Khashoggi killing [Reuters] In a speech to parliament about a case that has sparked outrage around the globe, Erdogan did not mention Crown Prince Mohammed bin Salman, who some U.S. lawmakers suspect ordered the killing. But he said Turkey would not complete its investigation into Khashoggi’s death until all questions were answered. “Intelligence and security institutions have evidence showing the murder was planned.... Pinning such a case on some security and intelligence members will not satisfy us or the international community,” he said.

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Caterpillar shares dive 7% after industrial giant says material costs are rising because of tariffs [CNBC] The company reiterated its prior 2018 adjusted earnings guidance to range of $11 to $12 per share, but Wall Street expected the company to raise that forecast. The lower range of that forecast fell short of the $11.65 EPS estimated by analysts surveyed by Refinitiv. "Manufacturing costs were higher due to increased material and freight costs. Material costs were higher primarily due to increases in steel prices and tariffs," the company said. "Freight costs were unfavorable primarily due to supply chain inefficiencies as the industry continues to respond to strong global demand." Later in the statement, the company said the impact of tariffs for third-quarter material costs was about $40 million.

SoftBank Chief Is Said to Have Canceled Appearance at Saudi Conference [NYT] Word of Mr. Son’s decision not to attend came on Tuesday, the first day of the conference. A representative for SoftBank, the Japanese internet, energy and financial conglomerate, did not immediately respond to a request for comment. High-profile executives from around the world have steadily pulled out of the conference as the furor has grown over Mr. Khashoggi’s killing this month at the Saudi Consulate in Istanbul.

Big Oil’s Flood of Cash Underwhelms Investors [WSJ] The world’s six largest Western energy companies— Exxon Mobil Corp. , Chevron Corp. Royal Dutch Shell PLC, BP PLC, Total SA and Equinor AS A—are set to generate their biggest profits since 2013. At the same time, they are projected to produce $90 billion in excess cash, the most in a decade, according to S&P Global Market Intelligence. Yet while the price of the global oil benchmark has surged around 20% so far this year, those six companies have seen their shares rise by an average of roughly just 4%, according to FactSet. In the past, energy stocks have moved more in line with the price of crude. While the European companies have seen their share prices rise this year, both Exxon’s and Chevron’s stock has fallen.

Former Oculus CEO Brendan Iribe is leaving Facebook [Verge] Iribe was an Oculus co-founder, helping Rift inventor Palmer Luckey to launch the experimental headset on Kickstarter in 2012. He served as CEO until 2016, when he stepped down to lead Oculus’ PC-based Rift VR division, and the CEO position was replaced by a “Facebook VP of VR” role held by Hugo Barra. Iribe was conspicuously absent at last month’s Oculus Connect conference, where fellow co-founder Nate Mitchell handled press interviews — and where PC-based VR was basically an afterthought, compared to standalone mobile headsets. VRFocus confirms that Mitchell will lead the division going forward.

Blackstone seen sticking with SAC despite insider trading probe (Reuters / Matthew Goldstein) Three sources said the asset management arm of Blackstone, which has $550 million invested with SAC Capital, is in no rush to redeem money from the Stamford, Connecticut-based hedge fund. Blackstone has had at least three discussions with the $14 billion hedge fund's executives about the insider trading investigation and talked to its own investors, which include state pension funds, endowments and wealthy individuals. Hitler parody leaves French bank BNP red-faced (IN24) French banking giant BNP was left red-faced this week after it emerged managers were shown a motivational video featuring a parody of a famous scene from the film "Downfall" in which Adolf Hitler is portrayed as the boss of Germany's Deutsche Bank. It’s a scene that has been parodied thousands of times before to comic effect. But it appears not many people have seen the funny side of one particular version made by executives of French bank BNP Paribas...In the video, which was shown to around 100 managers from around the world at a seminar in Amsterdam last year, Hitler is turned into a fuming boss of Germany’s Deutsche Bank reacting furiously to news that BNP has gained an edge in the foreign exchange market. But far from being motivated, many of the managers who saw the video were outraged. “We could not believe the bank had actually dared to do that – make an analogy between our competitors and the Nazi regime. It took us a few minutes to take it in,” one BNP employee told French daily Liberation, who revealed the story this week. “We were shocked. Nobody knew how to react. Some Jewish employees from the United States did not find it funny at all,” another employee told the paper. “If this video had been shown by an American bank it would have been a major scandal,” an angry BNP source added. Rather surprisingly the video is believed to have been uploaded to the bank’s internal Intranet site before the management realised it might prove embarrassing and quickly removed it. A spokeswoman for BNP told FRANCE 24 on Friday that the bank’s senior management were totally unaware the video had been made until they were contacted by Libération this week. The spokeswoman said BNP’s CEO Jean Laurent Bonnafé had called his counterpart at Deutsche Bank Jürgen Fitschen to personally apologise for the stunt. In a statement in Libération the bank added that the message in the video was “contrary to the values of BNP." Obama Summons Congress Leaders as Budget Deadline Nears (Bloomberg) Obama, who had been negotiating one-on-one with House Speaker John Boehner, will meet today with Republicans Boehner and Senate Minority Leader Mitch McConnell, and Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi, both Democrats. Cliff Talks Down To The Wire (WSJ) It is still possible the two sides can reach a deal, especially with the leaders meeting Friday. Any resolution would be a scaled-back version of the package Mr. Obama and congressional leaders had anticipated passing after the November election. The White House is pressing for the Senate to extend current tax rates for income up to $250,000, extend unemployment benefits, keep the alternative minimum tax from hitting millions of additional taxpayers and delay spending cuts set to take effect in January. The 11th-hour strategy carries enormous risk because it leaves no margin for error in Congress's balky legislative machinery. Senate Majority Leader Harry Reid (D., Nev.) said the prospects for passage of a bill before the last day of the year are fading rapidly. "I have to be very honest," he said. "I don't know time-wise how it can happen now." Spain's PM does not rule out asking for European aid (Reuters) Spanish Prime Minister Mariano Rajoy said on Friday he did not rule out tapping the European Central Bank's bond-buying program for troubled euro zone governments but said Spain did not expect to have to ask for aid for now. "We are not thinking of asking the European Central Bank to intervene and buy bonds in the secondary market," he said at a news conference in Madrid. "But we can't rule it out in the future." Banks pay $4.5M for muni charges (NYP) Citigroup and Bank of America’s Merrill Lynch are among five firms that will pay $4.48 million to settle regulatory claims they used funds from municipal and state bond deals to pay lobbyists. Local authorities were unfairly asked to reimburse payments that the firms made over five years to the California Public Securities Association, a lobbying group, to help influence the state, the Financial Industry Regulatory Authority, which oversees securities firms, said yesterday. The firms inadequately described the fees, wrapping them into bond-underwriting expenses, Finra said...The banks, also including Goldman Sachs, JPMorgan and Morgan Stanley, agreed to pay $3.35 million in fines and reimburse certain California bond issuers $1.13 million. Porsche Wins Dismissal of US Hedge Fund Lawsuit Over VW (Reuters) A five-justice panel of the New York State appeals court in Manhattan unanimously found that Porsche had met its "heavy burden" to establish that the state was the wrong place in which to bring the lawsuit. That panel reversed an Aug. 6 ruling by New York State Supreme Court Justice Charles Ramos that let the case by hedge funds including Glenhill Capital LP, David Einhorn's Greenlight Capital LP and Chase Coleman's Tiger Global LP proceed. The funds accused Porsche of engineering a "massive short squeeze" in October 2008 by quietly buying nearly all freely traded ordinary VW shares in a bid to take over the company, despite publicly stating it had no plans to take a 75 percent stake. IPOs Slump To Lowest Levels Since Financial Crisis (Bloomberg) IPOs have raised $112 billion worldwide this year, the least since 2008, according to data compiled by Bloomberg. Initial sales in western Europe dropped to one-third of last year’s level, while concern about China’s economy helped cut proceeds in Asia by almost half. U.S. offerings raised $41 billion, little changed from last year, as Facebook’s IPO spurred a monthlong drought in U.S. deals. Avery Johnson Jr. vents on Twitter after dad, Avery Johnson, is fired by Brooklyn Nets (NYDN, RELATED) The ex-Nets coach’s teenage son took to Twitter to vent after news broke that his dad had been given a pink slip by billionaire Mikhail Prokhorov and the Nets. “This is a f------ Outrage. My dad is a great coach, he just got coach of the month and they Fire him. #Smh. Completely new team he had,” Johnson Jr. wrote on Twitter. “The expectations were way to high for this team. We didn’t even have a losing record.... Didn’t even give my dad a full season. #OUTRAGE,” Johnson Jr. continued. Johnson was fired a day after the new-look Nets fell to .500 following a listless road loss to the Bucks. The canning comes on the heels of Deron Williams saying he’s never been comfortable playing in Johnson’s offense. Williams, who did not play in Wednesday night’s loss, is mired in a season-long shooting slump with field goal and 3-point percentages at career-worst levels. “I’m sorry (our) best players couldn’t make open shots. Yeah that’s my dad’s fault totally,” Johnson Jr. tweeted. 'Whale' Capsized Banks' Rule Effort (WSJ) Wall Street banks entered 2012 confident they could stall a wave of rules that they feared would hurt profits. But they are ending the year largely resigned that their activities will be constrained and monitored more closely by the government. One big reason for the change: J.P. Morgan Chase JPM -0.76% & Co.'s "London whale" losses. The bad trades, ultimately resulting in about $6 billion in losses, disrupted the banks' campaign against the Dodd-Frank financial overhaul, according to regulators, lawmakers and close observers of policy debates in Washington. The trades damaged the reputation of J.P. Morgan, which suffered less than other banks from the financial crisis, and its chief executive, James Dimon, during a crucial period of policy debate in Washington, putting critics of Dodd-Frank on the defensive. Before news of the whale losses emerged, banks were arguing, with some success, that too-tight regulations were crimping lending during a time of slow growth. Michael Greenberger, a finance professor at the University of Maryland and an advocate of regulations aimed at reining in bank trading, said that in early 2012 his allies' "backs were against the wall." "Then the London whale blew all of that out of the water," he said. Mortgages Fueled Hedge Funds To 13.9 Percent Gain (NYP) Hedge funds that invest in mortgage-backed securities gained 13.9 percent through November to make them the industry’s best-performing strategy, according to the Absolute Return index. Top players that did even better included Metacapital Management, Pine River, Axonic Capital, and Greg Lippman's LibreMax Capital. High-Speed Traders Race to Fend Off Regulators (WSJ) Defenders say high-frequency trading keeps markets lubricated with a constant supply of buy and sell orders that enables all participants to trade more efficiently and get better pricing. High-speed traders, supporters add, have helped foster competition among exchanges and other trading venues, lowering commission-based fees for small investors and helping bring down overall costs for mutual-fund managers. Another benefit some cite: Technology innovations spurred by high-speed traders serve to connect more investors to more trading venues, broadening their options in the markets. Critics, for their part, worry that the traders' order torrent makes markets more opaque, less stable and ultimately less fair. Will 'Fiscal Clif' Accelerate Millionaire Deaths? (NetNet) John Carney: "...it at least seems likely that some deaths that might otherwise have occurred shortly after January 1 will occur shortly before." Man gets DUI after driving on AA co-founder's lawn (AP) Vermont State Police say a man faces a drunken driving charge after driving onto the lawn of a historic home once owned by the co-founder of Alcoholics Anonymous. Police say 55-year-old Donald Blood III of Marlborough, Mass., was ordered to appear in court in Bennington on Jan. 14. Police say Blood thought he was driving into a parking lot, but actually it was the lawn of the Wilson House, built in 1852 in Dorset, the birthplace of AA co-founder Bill Wilson. The Wilson House's website describes it as a "place of sanctuary where people can come to give thanks to God for their new lives." It still hosts several AA meetings each week. Programming Note< : We’re on an abbreviated, vacation-esque schedule this week (opening news roundups and limited updates whenever the urge to reach out and touch you moves us). We still want to hear from you, though, so if anything happens that you think might tickle our fancy, do not hesitate to let us know.

British Banks Face Heat From On High (WSJ) The Right Reverend Justin Welby, Bishop of Durham, is grilling top bankers as part of a new parliamentary inquiry into "banking standards" that represents the U.K. government's latest attempt to shake up the industry. The inquiry was established in July on the heels of news that several banks allegedly sought to rig interest rates such as the London interbank lending rate, known as Libor. Bishop Welby, a former oil executive who sits in Britain's House of Lords, has joined nine other lawmakers in assembling a report that will consider new rules on everything from corporate governance to conflicts of interest. The inquiry also involves a series of public hearings already under way. Sitting in a castle in his diocese in northern England, Bishop Welby said the inquiry isn't about digging into the details of banks' alleged failings in the Libor scandal and other matters. Rather, it is an attempt to determine more broadly the future role of the industry. "It's an existential question," he said. "It's about why the bankingindustry is here." Spain To Borrow $267 Billion Of Debt Amid Rescue Pressure (Bloomberg) Spain’s debt will widen to 90.5 percent of gross domestic product in 2013 as the state absorbs the cost of bailing out its banks, the power system and euro-region partners Greece, Ireland and Portugal. This year’s budget deficit will be 7.4 percent of economic output, Budget Minister Cristobal Montoro said at a press conference. Spain’s 6.3 percent target will be met because it can exclude the cost of the bank rescue, he said. Euro Leaders Face October of Unrest After ECB’s September Rally (Bloomberg) With the first of three summit meetings that European Union President Herman Van Rompuy has called “crucial” taking place in Brussels on Oct. 18-19, investor sentiment toward the euro area that surged in September is on the wane. “People are beginning to look at this in a more sober way” after the ECB bond-buying plan and a German high-court decision releasing bailout financing spurred optimism over the past month, Clemens Fuest, an economist at Oxford University’s Said Business School, said in an interview yesterday. October, which marks the third anniversary of the debt crisis, will showcase euro-area leaders fighting out their differences. The discord underscores the inadequacy so far of ECB President Mario Draghi’s bid to calm the crisis through a pledge on sovereign-debt purchases. Graduates Turn Away From Wall Street (FT) MBA statistics show a steady decline in the number of graduates taking jobs at investment banks. The Wharton school at the University of Pennsylvania, which bankers consider the “conveyor belt of Wall Street”, sent 16.6 percent of its class to investment banks in 2011 compared with more than one in four in 2008. The pattern is similar at other large business schools. “The number of students going into financial services has remained steady but what’s changed has been the types of roles,” said Maryellen Lamb, director of MBA career management at Wharton. “We’ve seen more opportunity for students in private equity and hedge fund roles.” Yield hunt pushes funds into CLOs, CDOs (Reuters) Fund managers are increasingly eyeing riskier exotic assets, some of which haven't been in fashion since the financial crisis, as yields on traditional investments get close to rock bottom. Returns from investments in "junk" bonds, government guaranteed mortgage securities and even some battered euro-zone debt are plunging in the wake of global central bank policies intended to suppress borrowing costs. In particular, the Federal Reserve's latest move to juice the U.S. economy by purchasing $40 billion of agency mortgage-backed securities every month is forcing some money managers who had previously been feasting on those securities to get more creative. The only problem is they may be getting out of their comfort zones and taking on too much risk. "I would not be surprised if some managers are reaching outside of their expertise for a few extra basis points," said Bonnie Baha, a portfolio manager for DoubleLine's Global Developed Credit strategy. Arnold Schwarzenegger 60 minutes interview video: admits habit of keeping secrets, affairs (CNN) While he did not specify how many affairs he'd had before Shriver filed for divorce in July 2011, Schwarzenegger admits two women he was involved with include "Red Sonja" co-star Brigitte Nielsen (while he and Shriver were dating, according to Schwarzenegger) and his family's longtime housekeeper, Mildred Patricia Baena. Nine months after Schwarzenegger and Baena had their affair, she gave birth to a son -- less than a week after he and Shriver's fourth child, Christopher, was born. Baena remained the family's housekeeper for years, with her son sometimes around the house as well. But Schwarzenegger said in the "60 Minutes" interview that he didn't have any suspicions he was the father until the boy was 7 or 8 years old and he began to notice "that he started looking like me." "It was never discussed, but I put things together," said Schwarzenegger, whose autobiography "Total Recall" hits bookshelves Monday. After that realization, he said he began sending Baena extra money for her and her son, without talking about his being the boy's father. Schwarzenegger also denied to Shriver that he'd had an affair and that Baena's child was his son -- until Shriver confronted him during a marriage counseling session a few months before their break-up. "She said, 'Am I off on this or am I not?' And I said, 'You are absolutely correct.'" More Wall Street Layoffs Coming (NYP) Nomura analyst Glenn Schorr said in a recent report warns that many banks, which are still overstaffed, need a more liberal wielding of the ax to squeeze out more profits in the coming years, amid a global market that continues to look sluggish. “While overcapacity is weighing on returns under the current environment, most bank managements have been in the camp that the industry is currently experiencing a cyclical rather than secular downturn,” Schorr writes. “So they’ve been slow to do too much on the head-count front,” the bank analyst said regarding layoffs. According to Schorr’s research, big banks like JPMorgan, Credit Suisse, UBS and Barclays have actually added jobs over the past three years. Goldman Sachs and Morgan Stanley have only slashed about 1 and 2 percent of their work forces, respectively. Orange Juice Gets Squeezed (WSJ) Since the start of the current hurricane season, futures prices have climbed as high as $1.4095 a pound. Traders and analysts said the possibility of storm damage fueled much of the rise. But since no such storm has materialized, investors are taking profits or cutting their losses, they added. Vikram's Housing Woes (NYP) Pandit is on track to lose money on the sale of his Greenwich, Conn. home, which he bought in June 2001 for $4.1 million. Pandit, 55, put the two-story Colonial on the market for $4.3 million in April. Now he has lowered the price to $3.9 million, according to Trulia.com. South Florida Man Inherits 13,000 Clown Items (SS) Richard Levine is now trying to wrap his head around the unusual pickle he inherited when his father-in-law and business partner died two years ago and left him essentially a warehouse full of curated items of buffoonery. There are clown dolls with faces of joy and sorrow. Clown paintings, some more colorful than others. Clown figurines and clown puppets, some tiny, some huge, some very disturbing. There are clown photographs, clown books and clown costumes...Levine, who runs the same Waterboy Sprinklers business his father-in-law started in the 1970s, said he barely has had the time to go through all of the items. He hopes to inventory all of it, sell most of it, keep some of it and donate the rest to a local charity group. "I am slowly starting to like them and getting enthusiastic about them. I can see how Jack was into them," Levine said. "I don't go for the sad clowns much though, but I really enjoy the happy ones."

Greece's Creditors Reach Aid Deal (WSJ) struck a deal in Brussels to cut Greece's debt to a level below 124% of gross domestic product by 2020, officials said. To satisfy IMF concerns that Greece's debt must fall even more to be considered "sustainable," euro-zone ministers agreed to bring the government's debt to under 110% of GDP in 2022. The deal will allow Greece to receive loan payments of about €44 billion ($57 billion) to be paid in three installments early 2013, tied to Greece's implementation of the continuing measures, said Eurogroup president Jean-Claude Juncker. The deal will lower Greece's debt through a mix of interest-rate cuts on loans to Athens, a buyback of Greek debt at sharply discounted prices and the European Central Bank returning profits linked to its holdings of Greek bonds to the Greek government. London Bankers Bracing for Leaner Bonuses Than New York (Bloomberg) nvestment bankers and traders at European banks should expect at least a 15 percent cut in pay this year, while U.S. lenders may leave compensation unchanged, three consultants surveyed by Bloomberg said. That’s because bonus pools at European banks may be reduced by as much as half, while those at U.S. firms, which can cushion the impact of falling fees in the region with earnings from home, may fall 20 percent, they said. “The real split is coming, and we will see the quantum divide this year,” said Tom Gosling, a partner at PricewaterhouseCoopers LLP in London, referring to the difference in pay between the two financial centers. “U.S. regulators don’t have the same obsession with pay structures that European regulators have.” Dimon Would Be Best to Lead Treasury in Crisis, Buffett Says (Bloomberg) “If we did run into problems in markets, I think he would actually be the best person you could have in the job,” Buffett said in response to a question about Dimon from Charlie Rose, according to the transcript of an interview that was scheduled to air yesterday on PBS. “World leaders would have confidence in him.” [...] Dimon, once dubbed Obama’s “favorite banker” by the New York Times, said in a 2011 CNBC interview that he could never work as Treasury secretary and was “not suited to politics.” Carney Abondons A Haven, Leaping Into British Storm (WSJ) Philipp Hildebrand, the former head of the Swiss National Bank, described Mr. Carney as one who "speaks bluntly and politely." The son of a professor and a teacher, Mr. Carney grew up in Edmonton, the capital of Canada's western province, Alberta. He played hockey as an undergraduate at Harvard. Mr. Carney has close links to Britain, having studied in Oxford University in the early 1990s. He worked for a time in Goldman Sachs' London office...Known as a diplomat, Mr. Carney, who supports the Edmonton Oilers NHL team, in his Ottawa office displays a mock street sign alluding to one of Canada's other pro teams, the Ottawa Senators. He cultivates an everyman image, recently discussing his musical tastes—from AC/DC to the hip-hop group Down with Webster—in local media interviews. Fiscal Cliff Compromise Elusive as Congress Returns (Bloomberg) “There’s still a great deal of ground that has to be covered before they get anywhere near a budget deal, and time is running” short, said Phil English, a former Republican congressman from Pennsylvania and now a lobbyist at Arent Fox LLP in Washington. The Secret Powers Of The Son-In-Law (WSJ) In couples where the husband initially reported being close to his wife's parents, the risk of divorce over the next 16 years was 20% lower than for the group overall. Yet when the wife reported being close to her in-laws, that seemed to have the opposite effect: The risk of divorce with these couples was 20% higher. Dr. Orbuch has a possible explanation: The wife who feels close with her husband's parents may find it difficult to set boundaries and over time may come to see their close relationship with her as meddling. "Because relationships are so important to women, their identity as a wife and mother is central to their being," says Dr. Orbuch, author of the 2012 book "Finding Love Again: 6 Simple Steps to a New and Happy Relationship." "They interpret what their in-laws say and do as interference into their identity as a spouse and parent." Men, for the most part, don't have this problem. Their identity as a father and a husband is often secondary to their identity as a provider, Dr. Orbuch says. As a result, they don't tend to take what their in-laws do so personally. Chicago, Illinois charges woman $105,761 for parking infractions she did not commit (TN) Jennifer Fitzgerald is fighting back against the city, her ex-boyfriend and United Airlines with a lawsuit filed November 2 in Cook County Circuit Court. According to the complaint, the somewhat confusing story starts when her former boyfriend Brandon Preveau, bought a 1999 Chevy Monte Carlo from Fitzgerald's uncle for $600 in 2008. Despite paying all the fees associated with owning a vehicle (registration, title and insurance) he put the vehicle's registration in Fitzgerald's name -- something the West Side Chicago resident claims was done without her knowledge...the couple broke up at the start of 2009 and Preveau took the car with him after their split. He used the Monte Carlo to drive to work at O'Hare Airport where he was employed by United Airlines. Preveau would leave the vehicle in O'Hare parking lot E, a secured outdoor lot surrounded by high chain link fencing, that is open to the flying public but also utilized by airport employees. The parking lot is owned by the city of Chicago and operated by Standard Parking Corporation, but according to the complaint, United Airlines leases spaces in the lot for use by airline employees. Unbeknownst to Fitzgerald, Preveau abandoned the vehicle. According to the complaints, "On or before November 17, 2009, Brandon drove the automobile into the parking lot and never drove it out again." While the car Preveau drove began receiving parking tickets at the O'Hare lot as early as May 23, 2009, the key date for this story is November 17, 2009. On that day the vehicle was issued seven different parking tickets including being in a hazardous and dilapidated condition, no city sticker, broken headlights, missing or cracked windows, expired plates, being an abandoned vehicle and most importantly a violation for parking a vehicle for more than 30 days in a city-owned lot. Intrade, Facing Charges, Won't Take U.S. Bets (WSJ) The online-predictions exchange Intrade—known for offbeat markets on presidential politics and the Academy Awards—said it would no longer accept bets from U.S. residents. The move came just hours after U.S. regulators filed a civil complaint against the firm over its commodities-focused markets. "We are sorry to announce that due to legal and regulatory pressures, Intrade can no longer allow U.S. residents to participate in our real-money prediction markets," the Dublin-based company said in a statement on its website. Intrade said that existing customers must exit their trades and close their accounts. In China, Hidden Risk of 'Shadow Finance' (WSJ) Shadow finance in China totals about 20 trillion yuan, according to Sanford C. Bernstein & Co., or about a third the current size of the country's bank-lending market. In 2008, such informal lending represented only 5% of total bank lending. The sector is lightly regulated and opaque, raising concerns about massive loan defaults amid a softening economy, with ancillary effects on the country's banks. Harvard Doctor Turns Felon After Lure of Insider Trading (Bloomberg) Today, Joseph F. "Chip" Skowron III, 43, is serving a five-year term for insider trading at the federal prison at Minersville, Pennsylvania. At FrontPoint, Skowron lied to his bosses and law enforcement authorities, cost more than 35 people their jobs and stooped to slipping envelopes of cash to an accomplice. FrontPoint is gone. Morgan Stanley, which once owned FrontPoint, is seeking more than $65 million from Skowron, whose net worth a year ago was $22 million. Until he’s a free man, his wife of 16 years will have to care for their four children and Rocky, their golden retriever, on her own...Health care has become America’s sweet spot for insider traders like Skowron. Among researchers, physicians, government officials and corporate executives, the lure of easy money in health-care insider trading has become epidemic. Since 2008, about 400 people were sued by regulators or charged with insider trading; of those, at least 94 passed or received tips involving pharmaceutical, biotechnology or other health-care stocks. Man Arrested For Saying He Had Dynamite in His Luggage at Miami International Airport (NBC) A man was arrested for telling a TACA ticket agent that he had dynamite in his luggage, which prompted the partial evacuation of Concourse J at Miami International Airport on Monday, Miami-Dade Police said. Alejandro Leon Hurtado, 63, a doctor from Guatemala, faces a charge of false report bomb/explosives at airport, the arrest affidavit said. It wasn't immediately known if Hurtado had an attorney. The ticket agent had just accepted Hurtado luggage, when he asked him about whether it contained hazardous materials. Hurtado answered that he had dynamite in the baggage, and the ticket agent asked him again if he had dynamite in his bag, and he replied that he did and started laughing, the affidavit said. "Once the Defendant was told that police were going to be called the Defendant stated that he was joking," the affidavit said. Hurtado admitted he did say he had dynamite in his bag, but that it was a joke. Hurtado was in custody on an immigration hold Monday night, according to online Miami-Dade Corrections records.

Dubai Debtors Go on Hunger Strike (FT) About 20 jailed foreign businessmen have gone on hunger strike in Dubai to protest against lengthy sentences for writing checks that bounced, a criminal offence in the United Arab Emirates. “I’ve exhausted every avenue that I can see,” Peter Margetts, 48, a former property developer, told the Financial Times from a prison pay phone. “I’ve exhausted the legal system, the lawyers have their hands tied here and they’re not going to rock the boat.” Mr. Margetts is one of three British prisoners who started a hunger strike on Sunday. Other jailed businessmen come from Ireland, Saudi Arabia, Bahrain, Lebanon, India and Pakistan. Many of the hunger strikers fell victim to Dubai’s once-thriving real estate market, struggling to meet their payments when boom turned to bust in 2008. Twelve face sentences of more than 20 years because each bounced check can translate into a jail term of up to three years. Wall Street Promotes Junk Bonds as Europe Erupts (Bloomberg) Morgan Stanley said last week that U.S. high-yield obligations were in a “sweet spot” as borrowers cut their debt loads. JPMorgan said junk yields will fall more than half a percentage point by year-end. Bank of America favors debentures rated in the middle tier of speculative grade. Gains on U.S. high-yield, high-risk bonds, which are little changed since the end of February, are set to accelerate as central banks respond more aggressively to contain Europe’s fiscal imbalances, Morgan Stanley and JPMorgan said. While forecasting the default rate will rise this year, Moody’s Investors Service says the figure will stay below historic averages. Facebook's Growth Slows (WSJ) In what is likely to be the last snapshot of its financial condition before the expected May IPO, Facebook disclosed Monday that its first-quarter profit and revenue declined from the final quarter of 2011...The company's first-quarter revenue was $1.06 billion, down 6% from the December quarter. In a regulatory filing, the company blamed the decline on "seasonal trends" in the advertising business and user growth in markets where Facebook generates less revenue per user. CIT Group Swings To A Loss (WSJ) CIT Group, the business lender that emerged from bankruptcy more than two years ago, posted a wider-than-expected loss of $446.5 million in the first quarter as costs tied to debt repayments weighed on earnings. CIT's lending activity increased, though, and its profit margins on loans improved from a year earlier, a trend that should continue as its efforts to slash debt helps reduce its funding costs in the long run. "We made further progress this quarter positioning CIT for profitability and growth," John Thain, the long-time Wall Street executive who took the helm of CIT in 2010, said in a statement. Harbinger Pays Early (AP) Phil Falcone’s Harbinger Capital Partners made a $48 million payment on its $190 million loan from Jefferies Group, avoiding a forced sale of assets of his hedge fund, according to a person familiar with the fund. The payment was made a week early and a half million dollars more than what’s due on April 30. Falcone raised money for the loan by selling some investments, said the person. Father And Son Ran 'Brothel On Wheels' (NYP) A father and son from Queens ran a lucrative — and cruel — brothel on wheels for two decades, using six livery drivers to deliver hookers to hotels and apartments, Manhattan prosecutors said today in announcing the ring’s breakup...Johns on the go could purchase and enjoy a sex act without ever leaving the back seat, officials said of the operation, quoting the price scale at $200 to $500 per customer. Business was good — one woman alone allegedly earned half-a-million dollars for the father and son last year, and the Georges employed five women at the time of the bust, officials said. But as nice as they were to customers, the alleged father and son pimps were nasty to their prostitutes, threatening them, giving them little money so as to keep them helpless and even branding them with tattoos — including a bar code on one woman’s neck, according to officials. At least one of the women had a heart tattoo on her breast with the word “Vee,” which is the dad’s nickname. At least three of the women had tattoos featuring the son’s nickname, “King Koby.” Calpers Scalpers (NYP) The former head of the nation’s biggest pension defrauded funds run by private-equity titan Leon Black’s Apollo Global Management to pay a pal’s placement agencies $20 million, a lawsuit filed yesterday charged. Federico Buenrostro, the CEO of the $235 billion California Public Employees’ Retirement System from 2002 to 2008, teamed up with buddy Alfred Villalobos’ Arvco Capital Research on a scheme to pocket the boatload of fees from Apollo, the Securities and Exchange Commission charged in a civil suit filed in a Nevada federal court. Villalobos was the deputy mayor of Los Angeles in 1993. It is charged that the two ginned up fake “disclosure letters” and sent them to Apollo, making it appear that Calpers OK’d the payment when, in fact, it had not. The two used the fake letters four times, the suit alleges. Judge: DA Can Subpoena Occupy Protester Tweets (NBC) A judge says an Occupy Wall Street protester can't stop prosecutors from getting his tweets as part of a case surrounding his arrest at a demonstration. A Manhattan criminal court judge ruled Friday there are reasonable grounds to believe the information is relevant. The judge also says Malcolm Harris can't legally challenge the subpoena sent to Twitter Inc., not him. Harris was among more than 700 demonstrators arrested Oct. 1 on the Brooklyn Bridge. Wal-Mart Said To Be Subject Of US Criminal Probe (Bloomberg) The Justice Department is investigating potential criminal charges under the U.S. Foreign Corrupt Practices Act, according to the person familiar with the probe who wasn’t authorized to speak publicly about it. Wal-Mart is conducting its own review of allegations that its representatives paid local officials in Mexico to get stores opened faster in the early 2000s. Chris Christie Not Happy With NJ Nets Move To Brooklyn (NYDN) As the Nets were preparing their farewell, the Governor of New Jersey was kicking them out the door. “I’m not going to the Nets game tonight and my message to the Nets is ‘Goodbye,’ ” Christie said. “If you don’t want to stay, we don’t want you. Seriously, I’m not going to be in the business of begging people to stay here. That’s one of the most beautiful arenas in America that they’ve had a chance to play in. It’s in one of the country’s most vibrant cities. “They want to leave here and go to Brooklyn? Good riddance. See you later.”

Apple To Announce Plans For Cash Hoard (WSJ) Apple will outline what it plans to do with a growing pile of cash by next month, according to Howard Ward, chief investment officer at Gamco Investors Inc. Apple, which has been grappling with investor criticism over the handling of its $137.1 billion in cash and investments, will add $42 billion in earnings to that sum in 2013, Ward said. Greenlight Capital Inc.’s David Einhorn has been urging Cupertino, California-based Apple to issue high-yielding preferred shares to spread the funds among investors. Investors are also urging Apple to consider a higher dividend payout. “We’re going to get an announcement from the company as to how they intend to reallocate some of their cash,” Ward said in an interview today on Bloomberg Radio’s “Surveillance” with Tom Keene. “They will put a floor under their stock at a higher price than it is today.” AIG shareholders win class-action status in lawsuit versus U.S. (Reuters) Two groups of American International Group shareholders won class-action status from a federal judge on Monday in a $25 billion lawsuit by former Chief Executive Maurice "Hank" Greenberg over alleged losses caused by the U.S. government's bailout of the insurer. U.S. Court of Federal Claims Judge Thomas Wheeler also appointed Greenberg's lawyer, David Boies, of Boies, Schiller & Flexner LLP, as lead counsel for the classes. Greenberg's Starr International Co, once AIG's largest shareholder with a 12 percent stake, sued the United States in 2011 over what eventually became a $182.3 billion bailout for the New York-based insurer. It said that by taking a 79.9 percent AIG stake and then conducting a reverse stock split without letting existing shareholders vote, the government conducted an illegal taking that violated the 5th Amendment of the U.S. Constitution. Citing Boies' estimate that "tens of thousands" of shareholders might be affected, Wheeler said "class certification is by far the most efficient method of adjudicating these claims." Both Sides Of SEC Nominee Face Heat (WSJ) In one version, Ms. White is a no-holds-barred crime fighter known for stretching the law to jail mob bosses and international terrorists. In another, Ms. White is a friend of Wall Street who worked for the past decade for the law firm Debevoise & Plimpton LLP, where she represented giant banks such as J.P. Morgan Chase. Blackstone: We're Betting Big On Residential Real Estate (CNBC) "Blackstone is now the largest owner of individual houses in the United States," Schwarzman told CNBC's "Squawk on the Street" Monday, pointing to his company's $3 billion portfolio of residential real estate. But given the nascent recovery in the housing market, they're not buying and selling them quickly but rather renting them out. "It's a good business for us. It's a new thing, but it's also good for America," he said. Icahn Gets Confidential Look At Feds Books (Reuters) Dell Inc has agreed to give Carl Icahn a closer look at its books, less than a week after the activist investor joined a growing chorus of opposition to founder Michael Dell's plan to take the world's No. 3 personal computer maker private...A source with knowledge of the situation said Icahn's and Dell's confidentiality agreement does not have a contractual "standstill" obligation - meaning he is not obligated to stop trading stock in the company. But the activist investor would not be able to trade the stock while he is privy to non-public information in any case, the source added. Phoenix society gives gator happier life with prosthesis (AZC) The alligator is Mr. Stubbs, who is part science project, part human endeavor, and much more. He’s also half-gator, half-rubber. The 11-year-old crocodilian now sports a 3-foot-long prosthetic tail, attached firmly with nylon straps. It replaces the original, which was bitten off more than eight years ago. As far as anyone at the Phoenix Herpetological Society knows, Mr. Stubbs is the first alligator to tolerate, if not sport, a prosthesis. It will take months, however, before Mr. Stubbs learns how to properly use the tail. For now, handlers are happy with smaller milestones. “The fact he doesn’t try to bite it (the tail) is a good sign,” said Russ Johnson, president of the Phoenix Herpetological Society. “Learning how to use it is going to take a lot of training.” The months-long project was overseen by someone well-versed in anatomy. Marc Jacofsky is executive vice president of research and development at the CORE Institute in Phoenix, which specializes in orthopedic care — for humans. While visiting the Herpetological Society, Jacofsky was asked if it would be possible to make an artificial tail for Mr. Stubbs. “I looked and saw there was enough there that we could probably do something that wouldn’t involve surgery,” Jacofsky said. “I also liked the idea because it would improve his life. Our motto at the CORE Institute is ‘Keep life in motion,’ and this certainly fit in with that. I was on board.” Jacofsky estimated the project has cost the Core Institute about $6,000 in donated labor and materials. Mr. Stubbs had been a project since shortly after arriving at the center in May 2005. The then-3-year-old gator was one of 32 confiscated from the back of a truck pulled over near Casa Grande, Johnson said. Officers called in the Arizona Game and Fish Department as soon as the cargo made its presence known. “Scared the heck out of the officer,” Johnson said. “No one expects to find alligators when you look into the back of a truck.” Greece Faces 150,000 Job-Cut Hurdle to Aid Payment (Bloomberg) Greece is locked in talks with international creditors in Athens about shrinking the government workforce by enough to keep bailout payments flowing. Identifying redundant positions and putting in place a system that will lead to mandatory exits for about 150,000 civil servants by 2015 is a so-called milestone that will determine whether the country gets a 2.8 billion-euro ($3.6 billion) aid instalment due this month. More than a week of talks on that has so far failed to clinch an agreement. Failed Sale Of Gleacher Is A Warning For Directors (WSJ) The Dell drama is still unfolding, but for a cautionary tale of how boards, even when they may be well-intentioned, can harm investors of a takeover target, take Gleacher. Shares in the small investment bank have lost more than 60% in the past year as the prospects for a deal evaporated, business dwindled and star traders left. Ironically for a firm that bears the name of Eric Gleacher, who made his name advising on big deals in the 1980s, the company failed to sell itself. At least as some critics see it, its independent directors are to blame. SEC Says Illinois Hid Pension Troubles (WSJ) For years, Illinois officials misled investors and shortchanged the state pension system, leaving future generations of taxpayers to foot the bill, U.S. securities regulators allege. The Securities and Exchange Commission on Monday charged Illinois with securities fraud, marking only the second time the agency has filed civil-fraud charges against a state. Bernanke Provokes Mystery Over Fed Stimulus Exit (Bloomberg) When Ben S. Bernanke asserted last month that the Federal Reserve doesn’t ever have to sell assets, he raised questions about how the central bank can withdraw its record monetary stimulus without stoking inflation. The Fed may decide to hold the bonds on its balance sheet to maturity as part of a review of the exit strategy Bernanke expects will be done “sometime soon,” he told lawmakers in Washington on Feb. 27. This would help address concerns that dumping assets on the market will lead to a rapid rise in borrowing costs. It also allows the Fed to avoid realizing losses on its bond holdings as interest rates climb. Man shot in buttocks at Calle Ocho Festival unaware he was wounded (Miami Herald) The shooting occurred around 4:30 p.m. as the man walked along Southwest Eighth Street and 11th Avenue, part of the throng of revelers who gather annually at the street festival in Little Havana. It’s unclear if something sparked the violence between the two men, or if the shooting was unprovoked. At first the victim did not realize he had been shot and kept strolling along the festival route. “He discovered later that he was bleeding and then passed out,” said Miami police spokesman Sgt. Freddie Cruz. The victim, who was hit in the left buttocks, was taken to Jackson Memorial Hospital, where he is in stable condition and expected to recover.

Austerity Strikes Sweep Across Europe (WSJ) Unions in Spain, Portugal and Greece went on strike Wednesday to protest government austerity plans amid a wide economic contraction across Europe's periphery, but questions remained about the unions' ability to influence economic policy. The general strike led to minor violent incidents in Spain, even though morning business activity seemed to remain relatively normal. Spain's government said 32 people had been arrested since midnight, and national TV showed small clashes with police, as well as rallies held by union members in transportation hubs like train and subway stations. The Spanish unions are protesting austerity cuts and an unemployment rate at 25% of the workforce. Geithner Warns Against Delaying Solution to US Fiscal Crisis (Reuters) With lawmakers and the White House bickering over how to put the country on a sustainable fiscal path, a number of lawmakers and think tanks have argued for more time. "That will leave all the uncertainty you don't like on the table," Geithner said at an event sponsored by the Wall Street Journal in his first public comments on the looming fiscal crisis since President Barack Obama won re-election last week. Facebook Investors Brace For Big Round Of Unlocked Shares (Bloomberg) Restrictions lift today on 804 million shares held by former employees and those who sold at the initial public offering, almost doubling the total available for trading, according to a regulatory filing. Geithner’s Money Fund Overhaul Push Sparks New Opposition (Bloomberg) Geithner, heading a Washington meeting of the Financial Stability Oversight Council, a group formed by the Dodd-Frank Act to address systemic financial risks, won unanimous approval for a draft recommendation to the SEC spelling out three ways to overhaul the $2.6 trillion industry. A new option would require capital buffers of as much as 3 percent of assets, while two other solutions he offered were opposed earlier by the fund industry and rejected in August by an SEC majority. Representatives for the fund industry, who last month put forth their own plan, immediately denounced the proposals as stale and unhelpful. While Geithner has said the SEC is best positioned to address money funds, he has also said that the regulators’ panel, often referred to as FSOC, might intervene and subject funds to oversight by the Federal Reserve if the SEC fails to act. SEC Expands Knight Probe (WSJ) The Securities and Exchange Commission has deepened its probe into whetherKnight Capital Group Inc. did enough to police its trading systems before computer errors nearly destroyed the brokerage. The inquiry, which began after Knight's errant Aug. 1 trades saddled it with more than $450 million in losses, initially focused more narrowly on what caused the errors. The probe has broadened to look further at the company's risk-control procedures and Knight's compliance with a rule implemented last year—called the market-access rule—that requires brokerages to guard against these sorts of problems, say people familiar with the investigation. Blankfein Warns Over Cuts (FT) The financial industry should not go “overboard” in cutting costs in reaction to current market conditions, the chief executive of Goldman Sachs said yesterday. “Our industry has a long history of letting too many people go at the bottom of the cycle and hiring too many at the top,” Mr. Blankfein told an industry conference in New York. Pepsi's New Fat Blocking Soda Unleashed On Japanese Consumers (Forbes) Up until recently, soda manufacturers have at least tacitly acknowledged that their carbonated swills aren’t healthy options. Up until recently. [Then] yesterday, Pepsi-Cola in Japan launched a fiber-infused iteration of its cola drink. According to Suntory, the sole distributor of Pepsi in Japan, the beverage contains “indigestible dextrin,” more commonly known as dietary fiber. This magic ingredient, Suntory’s website claims, helps reduce the amount of fat that’s absorbed into the body, hence the tagline of the new drink as a “fat-blocking soda.” Suntory also proffers that the drink quells the rise in triglycerides in the blood that normally follows a meal. Rochdale May Be At The End Of Its Rope (NYP) Stamford, Conn.-based Rochdale Securities is struggling to secure a deep-pocketed buyer three weeks after a former trader, identified as David Miller, saddled the firm with $1 billion in “unauthorized” Apple trades that it wasn’t able to cover. CEO Dan Crowley has been working around the clock to identify a “white knight” willing to save the 55-person broker dealer, according to sources. But staffers of the 37-year old firm worry ongoing investigations will turn off suitors and impede the firm’s ability to operate as a broker dealer. BNY Mellon Unit Settles Madoff Suits (WSJ) The Ivy Asset Management unit will pay $210 million to resolve a series of lawsuits claiming that it concealed doubts about the business operated by convicted Ponzi schemer Bernard L. Madoff. Shareholders To Citi: Break This Company Up (AP) Trillium Asset Management, a shareholder advisory firm with more than $1 billion in assets under management, effectively renewed call made recently by Sandy Weill, Citigroup’s former CEO and one of the founding fathers of the “financial supermarket” concept that helped turn Citi into a global banking behemoth. Siewert In Line For Goldman Partnership (NYP) Hired only last March, Richard “Jake” Siewert, the head of corporate communications, could be among the 70 or so new partners the 144-year-old bank is set to announce this morning...Siewert’s predecessor, Lucas Van Praag, made partner in 2006 — five years after joining the firm. Paula Broadwell Warned Gen. Allen Against "Seductress" Jill Kelley (CBS) A senior official has told CBS News correspondent David Martin the vast majority of the emails between Allen and Tampa socialite Jill Kelley were "completely innocuous," and the general believes many of the 20-30,000 pages under scrutiny are duplicates. The official said that in some of the emails, Kelley would say things like, "saw you on television and you were terrific," and Allen would write back with "thanks, sweetheart." The official said the two never discussed sex and that Allen had never been alone with Kelley. Nonetheless, CBS News correspondent Bob Orr says Pentagon and FBI sources describe the communications as "potentially inappropriate" and "flirtatious," and another source says they were likely more than just innocent exchanges -- noting that the Pentagon's Inspector General is involved for a reason. Among the hundreds of emails exchanged between Allen and Kelly - Orr reports that investigators are focusing on one from several months ago. In it, Allen told Kelley he'd just received an anonymous email warning him to stay away from her. Sources say that the anonymous email came from Broadwell, Petraeus' mistress, who allegedly warned Gen. Allen that Kelley was "a seductress." Broadwell allegedly sent similar warnings to other military officers at the U.S. Central Command, located near Kelley's Tampa home. Broadwell, who had been out of sight since the scandal emerged on Friday, was spotted Tuesday night preparing dinner and drinking a glass of wine inside her brother's Washington home.